Purcell v. Santa Fe Minerals, Inc.

• Decision Date: 02 June 1998
• Docket Number: No. 82962,82962
• Citation: 961 P.2d 188,1998 OK 45
• Parties: Eleanor M. PURCELL, Appellee, Counter-Appellant, v. SANTA FE MINERALS, INC., a corporation, Appellant, Counter-Appellee.
• Court: Oklahoma Supreme Court

Page 188

961 P.2d 188

1998 OK 45

Eleanor M. PURCELL, Appellee, Counter-Appellant, v. SANTA FE MINERALS, INC., a corporation, Appellant, Counter-Appellee.

No. 82962.

Supreme Court of Oklahoma.

June 2, 1998.

As Corrected June 15, 1998.

Certiorari to the Oklahoma Court of Civil Appeals, Div. II.

¶0 The lessor of mineral interests sued, claiming that she had been under-paid because certain expenses had been deducted from her royalty payments. Defendant/lessee argued that the expenses were post-production expenses properly chargeable against the royalty interest. Both sides sought summary judgment. The Edward C. Cunningham, District Judge of District Court of Canadian County, gave plaintiff judgment. Defendant appealed and Plaintiff counter-appealed. The Court of Civil Appeals, Division 2, affirmed in part and reversed in part. Defendant sought certiorari. We reverse in part, and remand for the trial court to apply the holding of the Court's recent opinion in Mittelstaedt v. Santa Fe Minerals, Inc., and further hold that a five-year statute of limitations applies to plaintiff's claim for interest as well as royalty.

CERTIORARI PREVIOUSLY GRANTED, OPINION OF THE COURT OF CIVIL APPEALS VACATED IN PART, JUDGMENT OF THE DISTRICT COURT REVERSED IN PART AND AFFIRMED IN PART, AND CAUSE REMANDED TO THE DISTRICT COURT FOR FURTHER PROCEEDINGS.

William K. Elias, Michael J. Massad, of Elias, Books, Brown, Peterson & Massad and Frank H. McGregor, Oklahoma City, for Eleanor Purcell.

Gary W. Davis, Mark D. Christiansen, Paul D. Trimble, Oklahoma City, and William H. Boyles of Gibson, Dunn & Crutcher, Dallas, TX, for Santa Fe Minerals, Inc. Joseph W. Morris, Teresa B. Adwan, M. Benjamin Singletary, Gable & Gotwals, Inc., Tulsa, and Brenton B. Moore, Tulsa, for Amicus Curiae Oklahoma Division of the Mid-Continent Oil & Gas Association.

SUMMERS, Vice Chief Justice.

¶1 The only question remaining on appeal for the Court is to determine which statute of limitations controls Plaintiff/lessor's claim for statutory pre-judgment interest on her recovery against the lessee for underpaid royalties. We conclude that it is the five-year statute governing claims on written contracts, rather than the three-year version applicable to liability created by statute.

¶2 Eleanor Purcell filed suit, claiming that she was lessor of certain mineral interests in Canadian County, and that Santa Fe Minerals, Inc. (Santa Fe), as lessee had underpaid her in making its royalty payments. She also sought prejudgment and post-judgment interest. By way of partial summary judgment Purcell was awarded the amount of $317,504.04, with an additional amount for interest. Santa Fe appealed, arguing that it correctly deducted certain costs from the royalty payments, and that the trial court erroneously applied a five-year statute of limitations. Purcell counter-appealed, arguing that she was entitled to interest at a 12% rate instead of the 6% awarded by the trial court. The Court of Civil Appeals affirmed the trial court's disallowance of deductions for post-production costs, affirmed the allowance of statutory prejudgment interest, and affirmed the applicability of a five-year statute of limitations. It reversed the trial court's use of 6% as interest and remanded, directing that it be calculated at 12%.

I.

¶3 The primary issue in this appeal is whether the language of the lease allowed Santa Fe Minerals, Inc., to deduct certain expenses from the royalty payments made to Purcell. We recently addressed this issue in our answer to a question certified to this Court from the United States Court of Appeals for the Tenth Circuit, Mittelstaedt v. Santa Fe Minerals, Inc., 1998 OK 7, 954 P.2d 1203, (petition for rehearing not filed). We said:

In sum, a royalty interest may bear post-production costs of transporting, blending, compression, and dehydration, when the costs are reasonable, when actual royalty revenues increase in proportion to the costs assessed against the royalty interest, when the costs are associated with transforming an already marketable product into an enhanced product, and when the lessee meets its burden of showing these facts.

1998 OK 7, at p 30, 954 P.2d 1203.

¶4 We ordered the parties here to brief the effect of Mittelstaedt upon this appeal. Both agree that it controls, and both state that the matter should be remanded for further proceedings in the trial court. Plaintiff/Purcell notes that she "has not been afforded an opportunity to investigate and/or challenge Santa Fe's allegations in the context of Mittelstaedt." She further states that "[t]he Court should remand the District Court's ruling on the deduction issue with instructions for further proceedings in accordance with Mittelstaedt." Defendant/Santa Fe is in agreement, and states that "Santa Fe should be given an opportunity to supplement the factual record in light of the Mittelstaedt decision to aid the District Court in issuing a new ruling in this case." We accordingly reverse that part of the judgment of the District Court adjudicating Purcell's claim to unpaid royalty income, and remand for further proceedings in light of this Court's opinion in Mittelstaedt. Since the law on the primary issue in this appeal has been decided the motion for oral argument is denied.

II.

¶5 When Santa Fe sought certiorari to review the opinion of the Court of Civil Appeals it raised two issues: (1) how to calculate Purcell's royalty (the Mittelstaedt issue) and (2) the proper statute of limitations. The Court of Civil Appeals had determined that the applicable interest rate was 12% instead of the 6% awarded by the trial court. That decision by the appellate court is not before us on certiorari, and thus becomes a part of the law of this case. Lockhart v. Loosen, 1997 OK 103, n. 1, 943 P.2d 1074, 1077; Nichols v. Mid-Continent Pipe Line Co., 1996 OK 118, pp 23-24, 933 P.2d 272, 281; Barnett v. Barnett, 1996 OK 60, p 13, 917 P.2d 473, 477. ¹ So all left for us is to examine the arguments on the statute of limitations as presented by the briefs filed on appeal and on certiorari. ²

¶6 Defendant Santa Fe argued in the trial court that Plaintiff's claim for unpaid royalties was subject to a five-year limitations period. The limitations period is five years for an action brought upon a contract, agreement, or promise in writing. 12 O.S.1991 § 95 (First). This provision applies to breach of an oil and gas lease. Indian Territory Illuminating Oil Co. v. Rosamond, 190 Okla. 46, 120 P.2d 349, 354 (1942). Plaintiff's claim is simply an allegation that the Defendant breached the leases. Plaintiff did not assert tolling nor any other doctrine to avoid the application of the five-year limitations period.

¶7 So, at this point it is undisputed that Purcell's claims for underpaid royalty are limited by the five-year limitation statute § 95(First), and that she is entitled to prejudgment interest at 12% as per § 540. The only question remaining is whether she is entitled to the 12% interest on her entire viable claim (back five years), or for some lesser period of time.

¶8 Santa Fe argued that the claim for 12% interest was not a contractual claim, but based upon a liability created by a statute, and that a three-year limitations period applied, citing, 12 O.S. § 95 (Second). Then on certiorari Santa Fe suggested that a one-year limitations period under 12 O.S. § 95 (Fourth) was consistent with the analysis made by the Court of Civil Appeals in this case. ³ Plaintiff argued that the 12% interest was a contractual claim, and that the five-year limitations period applicable to unpaid royalties also applied to the interest.

¶9 We must first note that the statute providing for the 12% rate, 52 O.S.1991 § 540 (now § 570.10), is now a part of the Production Revenue Standards Act, 52 O.S.Supp.1992 §§ 570.1 -570.15. That Act provides for a five-year limitations period for actions based upon the Act.

D. For purposes of the Production Revenue Standards Act, the statute of limitations on actions brought pursuant to the provisions of the Production Revenue Standards Act shall be five (5) years from the date the cause of action shall have accrued, provided however, nothing shall create, limit or expand any statute of limitations applicable to production occurring prior to September 1, 1992.

52 O.S.Supp.1992 § 570.14(D).

This statute also shows that the limitations period does not apply to production occurring prior to September 1, 1992. The case before us involves production prior to this date, and the limitations period now provided by § 570.14 does not apply to this controversy.

¶10 Santa Fe argues that the enactment of this statute, by itself, indicates that prior to its enactment a three-year limitation period applied. Santa Fe equates legislative silence during the period preceding § 570.14 on the issue of limitations with a legislative recognition that the Legislature was changing the law by enacting § 570.14. It is true that the Legislature is not presumed to perform vain and useless acts. Hill v. Board of Education, 1997 OK 111, p 12, 944 P.2d 930, 933; Bryant v. Commissioner of the Department of Public Safety, 1996 OK 134, p 11, 937 P.2d 496, 500. But the legislative voice may also be used to clarify existing law, as opposed to altering its substance. Texas County Irr. and Water Resources Ass'n. v. Oklahoma Water Resources Bd., 1990 OK 121, p 6, 803 P.2d 1119, 1122. Thus, Santa Fe's argument is not necessarily correct.

¶11 The three limitation periods of 12 O.S.1991 § 95 examined by the trial and appellate courts are as follows: ⁴

§ 95. Limitation of Other Actions.

Civil actions other than for the recovery of real property can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards:

First. Within five (5) years: An action upon any contract, agreement, or promise in writing;

Second. Within three (3) years: An action upon a contract express...